personal finance

Taking Your Household Budget Online

By Matt Bell for Sound Mind Investing

Several years ago, a strange trend emerged in the personal finance world. Using a budget started becoming something very close to cool. Until that time, the mere mention of the word "budget" brought looks of dread to most people's faces. What seemed to turn the tide was when budgets went online.

Today, the leading online budget tool, Mint.com, boasts more than 10 million users. Quicken, the perennial leader in the budget software space, was late to the online game. By the time it released an online version, it couldn't slow Mint's momentum, so Intuit (which makes Quicken) bought Mint in 2009 and soon discontinued Quicken Online.

Mint and its handful of competitors, including LearnVest.com, are online budget "pure plays" in that they link to your bank, credit card, and investment accounts, importing transaction data from those accounts automatically. There are hybrid budget tools as well, such as youneedabudget.com, which provide online budgeting but do not link to your financial institutions. You can download bank transactions with youneedabudget, but not automatically. It's designed for those who are concerned about the security of linking to their accounts.

Speaking of security, Mint and its pure online budget brethren point out that they use "bank level security"—the same approach your bank uses when providing you with online access. They are also "read-only" services, meaning you can see your bank balance, credit card, debit card, and check transactions, and investment performance, but you can't actually move any money around. If you can't take any money out of your accounts via Mint, neither could a cyber crook. Adding to the security of such tools is the fact that linking to your financial institutions does not require your account numbers—just your user ID and passwords.

At the Bell household, we've used Mint for three years and never had a security issue. We had been using the Quicken software, but switched to Mint for two primary reasons. First, the service is free, whereas you have to buy the Quicken software. Mint makes money from advertisers, but fortunately the presence of ads is not very distracting. (Since Mint knows where you do your banking and what credit cards you own, it offers suggestions as to where you may be able to find better deals, mostly among its advertisers.)

The second reason we switched to Mint is the fact that it is an online service, which provides us with easier access to our budget information than software tied to one computer.

To take your household budget online, here are the first three steps. Mint will be used as the example, but the process is similar with other services.

Register

Opening an account with Mint requires only an e-mail address, your country of residence, your zip code, and a password.

Link to financial institutions

Try this instead: "Well, let's take a look at our budget and see how much I've spent this month compared to the golf budget we both agreed on. If I've spent too much this month, I'll make up for it next month by finding some less expensive places to play or by playing less often."

Set up a budget

Next you'll be asked to link to your bank, credit cards, and if you'd like, your investment accounts. That way, transactions can be automatically pulled into the tool (which takes a lot of the pain out of the budgeting process).

Two Keys to a Great Marriage

The prime value of a budget is that it gives you the information you need to manage your cash flow. And one of the prime values of an online budget tool is that you can access your budget from anywhere there's Internet access. Heading into a grocery store? Use the Mint smartphone app to quickly see how your actual grocery spending so far this month compares with your grocery budget. This is the key information you need to manage to the number—to make conscious, proactive, informed spending choices that help you to stay within your budget.

A common question from those who are new to the budget process is, "How much should I budget for groceries, clothing, and all the rest?" The SMI web site has recommended spending guidelines based on four household sizes and nine different annual incomes.

Use these guidelines to help you set up a budget on Mint. Click the "Budgets" tab, choose "Create a Budget," and then use the "Choose a Category" menu to enter targeted spending amounts in each of your relevant categories.

Once your categories are set up, click the "Transactions" tab where you should see all of the transactions Mint pulled from your bank. Go through the list to make sure the categories Mint has chosen are the same as the ones you chose in the "Budgets" tab. If you want Starbucks' expenses to be part of your "Entertainment" budget, you'll need to change Mint's likely default category, "Coffee Shops," accordingly. The good news is that when you click the "Edit Details" tab for a given transaction and change how it's categorized, Mint will ask whether you want all such transactions categorized that way—a big time saver.

Next time, we'll look at how to use Mint to actually manage cash flow.

Matt Bell is the Associate Editor of Sound Mind Investing, the best-selling investment newsletter written from a biblical perspective. SMI wants people to have more so they can provide well for their families and generously support God’s work.